January 28, 2004

Quote of the Day, Japan's "large affect" on gold

This story from Reuters qualifies as the quote of the day and the story of the day. The respite in the forex markets, where the dollar's decline isn't wholly disorderly, is allowing investors--including central banks--to rethink how many dollar denominated assets they want to own. "Fewer" will surely be the conclusion. But what other kind of currency reserves will foreign central banks own if they own fewer dollars? Wel...dare I suggest gold? Or should I let the Japanese Finance Minister do that for me? You'll note that he suggest gold cautiously...lest he have a "large effect" on gold markets. But that's precisely what's going to happen anyway, sooner or later. As a trader though, the Fin Min probably doesn't want to cause a run on gold. Then he'd have to pay more for it. If Japanese monetary authorities are treating the current gold lull as a chance to add gold as a reserve currency...that should be some comfort to you if you're worried about your gold stocks falling. Now is a great time to quietly accumulate... "TOKYO, Jan 28 (Reuters) - Japanese Finance Minister Sadakazu Tanigaki said on Wednesday he wanted to carefully consider whether to change the weighting of gold in Japan's foreign reserves. "Tanigaki told a parliamentary committee he thought it necessary to take a standpoint of diversifying assets in Japan's foreign reserves, which are mostly made up of dollar-denominated assets. "Asked about gold, he said he would think about it carefully. 'There are various discussions about the positioning of gold in foreign reserves, even among...currency authorities,' Tanigaki said. 'If I say something too simply, I think there could be a large effect on gold markets...so I would like to consider it carefully,' he said. "


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